Question

Company Corp. has purchased another company. The following information pertains to the purchase of the company and dealing with any necessary intangible asset issues. Use an Excel spreadsheet to prepare journal entries and move amounts to the general ledger.

1) On 1/2, the company purchases another company for $320,000. The purchased company had $80,000 in cash and $200,000 in PP&E. The purchased company had no other assets or liabilities. This journal entry can be entered in the cash journal by summarizing the effect on cash of the purchase.

2) On 12/31, the company finds that the fair value of the purchased company is now $290,000. Prepare any necessary journal entry for goodwill impairment or revaluation.

Answer 1

Total Purchase Consideration	320,000
less: Net Assets	280,000
Goodwill	40,000

Journal Entries

Date	Accounts	Debit	Credit
2-Jan	Goodwill	40,000
	Cash	80,000
	PP&E	280,000
	Liquidators of Purchased Company		320,000
31-Dec	no journal entry will be passed for the increase noted in the value of purchased company after take over. Value of Goodwill will remain unaffected.

Posting of journal dated 2-Jan

Goodwill A/c
particular	debit	particular	credit
Lidquidators of Purchased Company	40,000

Cash A/c
particular	debit	particular	credit
Lidquidators of Purchased Company	80,000

PP&E A/c
particular	debit	particular	credit
Lidquidators of Purchased Company	200,000

Lidquidators of Purchased Company A/c
particular	debit	particular	credit
		Goodwill	40,000
		Cash	80,000
		PP&E	200,000